The Curious Case of the Disappearing Child Benefit

Written on Tuesday 5 October 2010

This morning, the Prime Minister used his BBC interview to let us know why, exactly, his proposed changes to the Child Benefit system take into account the income of a single family member rather than the household overall.

As loudly bemoaned in the media over the past few days, the Conservatives plan to scrap Child Benefit for higher rate tax payers, those earning over £44,000 a year. Because this is tied in to the tax situation for a single individual, it leads to wild inconsistencies in the family incomes that are affected. Under the scheme, a two-parent household where one parent earns £44,000 and the other does not work would lose their Child Benefit. However if both parents were to work and earn £43,000 each, for a total of £86,000, they would still receive the payments.

As someone who earns far less than £44,000 and who could still get by without Child Benefit if necessary, I have no problems with scrapping or reducing Child Benefit for those substantially more wealthy than myself. But couldn’t we at least make it fair?

David Cameron’s excuse for this unfairness is that to base it on household income rather than individual income would involve a whole new means-testing process, with all the added bureaucracy and money-wasting that involves.

Has Mr Cameron forgotten about Labour’s Child Tax Credit scheme, a bizarrely parallel yet unrelated programme under which working parents can claim more money. Child Tax Credits are means-tested based on household income in just the same way that the Prime Minister is claiming to be too much work. Would it not in fact reduce bureaucracy and wasted effort if both were to be combined into a single Child Benefit system that was means-tested on household income?

But no, apparently the decision is set in stone.

How do the Conservatives plan on trying to fix this unfairness? Apparently, it emerged this afternoon, with a married couples’ tax break. However, as the rumour heard by the BBC has it, this would only affect couples earning less than the £44,000 threshold – the household with one parent earning over £44,000 and one stay-at-home parent would not stand to benefit. It’s also reported as being introduced “before the 2015 election”, potentially leaving a four-year gap between then and now in which the unfairness of the Child Benefit change is not being adressed.

Furthermore, while the proposed married couples’ tax break thankfully includes civil partnerships, it presumably does not include long-term partners who choose not to marry. I imagine that encouraging traditional values such as marriage is a vote-winner amongst certain groups of Tory voters, but should the government not stay well clear of these very private decisions? Should a poor couple who do not want to marry be pressured into it, however gently, by their financial situation?